🤯 Picked by our AI, this stock rallied more than Nvidia this month, yielding 94% since MarchSee the stock

Morning Bid: Sliding yen rouses snoozing yuan

Published 03/26/2024, 01:33 AM
Updated 03/26/2024, 01:35 AM
© Reuters. Chinese 100 yuan banknotes and a Japanese 1,000 yen banknote are seen in this picture illustration in Beijing, China, January 21, 2016. REUTERS/Jason Lee/File photo
USD/JPY
-
AUD/USD
-
NZD/USD
-
USD/CNY
-
GC
-

A look at the day ahead in European and global markets from Tom Westbrook

As markets await key U.S. inflation figures this Good Friday, the focus is swinging to a sudden resurgence in yuan volatility.

After months of flatlining, traders are beginning to suspect some kind of shift at the People's Bank of China as the yuan logs some of its sharpest dollar swings this year.

Over a rocky few days, the currency has breached 7.2 per dollar, rebounded, and by Tuesday was again slipping toward the 7.2 level despite a signal of support from the central bank via a firm setting of the daily trading band. [CNY/]

Analysts at National Australia Bank (OTC:NABZY) think it is more than coincidence that the dollar/yuan pair broke 7.2 in the same week Japan abandoned its negative interest rate policy only to see the yen fall.

Against the yen, the yuan has made a three-decade high, which NAB analysts think may have motivated China's FX authorities to loosen their grip on the currency.

"China sensitivity to the CNY/JPY exchange rate makes sense in the context of Beijing not wishing to gift Japan a competitive advantage in the many areas where China and Japan compete in global markets," said NAB analysts Ray Attrill and Rodrigo Catril.

Unless, or until, dollar/yen stabilises, they may continue to let the yuan weaken leaving the Australian dollar under pressure too since it can often trade in sympathy with the yuan.

Aussie dollar short positions jumped last week and the currency has struggled to escape a narrow range this year. The New Zealand dollar, also sensitive to the yuan, has fallen through support to four-month lows and looks to be under pressure.

Gold, after touching a record high last week, was steady.

The European calendar is fairly bare on Tuesday, while second-tier data is due in the U.S. with consumer confidence, manufacturing, services and durable goods figures expected.

Good Friday is a holiday in most markets but is also when the U.S. publishes the Fed's favoured measure of inflation.

Asian stocks slipped slightly with the yuan on Tuesday, while policymakers' warnings of possible intervention kept the yen from falling and it held at 151.38 per dollar.

Key developments that could influence markets on Tuesday:

- German consumer confidence

- U.S. durable goods orders

- U.S. January home prices

© Reuters. Chinese 100 yuan banknotes and a Japanese 1,000 yen banknote are seen in this picture illustration in Beijing, China, January 21, 2016. REUTERS/Jason Lee/File photo

- U.S. consumer confidence

- Richmond Fed manufacturing activity; Dallas Fed services activity; Philadelphia Fed non-manufacturing activity

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.